A Flexible Parametric GARCH Model with an Application to Exchange Rates

Posted: 6 Mar 2001

See all articles by Kai Li Wang

Kai Li Wang

Tunghai University; Tamkang University

Christopher Fawson

Utah State University - College of Business - Department of Economics

Christopher B. Barrett

Cornell University - Charles H. Dyson School of Applied Economics & Management

James McDonald

Brigham Young University

Abstract

Asset price fluctuations commonly exhibit volatility clustering, asymmetry, leptokurtosis and high peakedness. Yet econometricians lack parametric methods flexible enough to accommodate all these effects. This paper introduces a GARCH model with a flexible parametric error distribution based on the exponential generalized beta (EGB) family. We apply this to daily exchange rate data for six major currencies and find this model outperforms alternative approaches.

Note: This is a description of the paper and is not the actual abstract.

Suggested Citation

Wang, Kai-Li and Fawson, Chris and Barrett, Christopher B. and McDonald, James B., A Flexible Parametric GARCH Model with an Application to Exchange Rates. Available at SSRN: https://ssrn.com/abstract=258373

Kai-Li Wang

Tunghai University ( email )

Taichung 407
Taiwan

Tamkang University ( email )

Department of International Trade
Taiwan 25137
China

Chris Fawson

Utah State University - College of Business - Department of Economics ( email )

3530 Old Main Hill
Logan, UT 84322-3530
United States

Christopher B. Barrett (Contact Author)

Cornell University - Charles H. Dyson School of Applied Economics & Management ( email )

315 Warren Hall
Ithaca, NY 14853-7801
United States
607-255-4489 (Phone)
607-255-9984 (Fax)

HOME PAGE: http://aem.cornell.edu/faculty_sites/cbb2/

James B. McDonald

Brigham Young University ( email )

130 Faculty Office Bldg.
Provo, UT 84602-2363
United States
801-378-3463 (Phone)

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